A Complete Guide to HOA Financial Statements

Effective financial management is the cornerstone of a successful homeowners association (HOA). HOA financial statements play a crucial role in ensuring transparency, legal compliance, and the overall well-being of the community. In this comprehensive guide, we’ll explore the essentials of HOA financial statements, including their purpose, types, preparation frequency, and responsible parties.

What is an HOA Financial Statement and Its Purpose?

An HOA financial statement is a formal record of an association’s financial activities over a specific period. These statements provide a clear picture of the HOA’s financial health, including its income, expenses, assets, and liabilities. The primary purpose of HOA financial statements is to:

• Ensure transparency and accountability to community members
• Aid in budget planning and decision-making
• Maintain legal compliance with state and federal regulations
• Identify potential financial issues and opportunities for improvement

Types of HOA Financial Statements

There are several types of HOA financial statements, each serving a unique purpose in providing a comprehensive view of the association’s financial standing.

Balance Sheet

A balance sheet offers a snapshot of an HOA’s financial position at a specific point in time. It lists the association’s assets (what it owns), liabilities (what it owes), and equity (the difference between assets and liabilities).

Income Statement

Also known as a profit and loss statement, an income statement summarizes an HOA’s revenue and expenses over a given period, typically a month or a year. It helps determine whether the association is operating at a surplus or deficit.

HOA Dues Statement

An HOA dues statement itemizes the assessments owed by each homeowner, including regular dues, special assessments, and any outstanding balances or late fees.

Cash Flow Statement/Bank Statement

A cash flow statement tracks the inflow and outflow of cash within the HOA, while a bank statement provides a record of all transactions in the association’s bank account.

General Ledger

The general ledger is a detailed record of all financial transactions, serving as the foundation for preparing other financial statements.

Reserve Fund Balances

Reserve fund balances show the amount of money set aside for future major repairs and replacements, such as roofing or pavement projects.

Notes to Financial Statements

Notes to financial statements provide additional context and explanations for the information presented in the other statements, ensuring clarity and transparency

How Frequently Should HOA Financial Statements be Prepared?

The frequency of preparing HOA financial statements varies depending on the size and complexity of the association. Smaller HOAs may prepare financial statements on a quarterly basis, while larger associations may need to generate them monthly. However, all HOAs should prepare a comprehensive annual financial statement at the end of each fiscal year.

Who is responsible for preparing HOA financial statements?

The responsibility for preparing HOA financial statements typically falls on the association’s treasurer, who is a member of the board of directors. However, many HOAs choose to outsource this task to professional community management companies or accountants to ensure accuracy and compliance with accounting standards.

Where do you need to submit the HOA Financial Statements?

The HOA Board of Directors

The board of directors is responsible for reviewing and approving the financial statements to ensure the association’s financial health and make informed decisions.

Community Members

HOA financial statements should be made available to all community members to maintain transparency and accountability. This can be done through regular HOA board meetings, mailings, or secure online portals.

State Department

Some states require HOAs to submit annual financial statements to the appropriate state department for review and record-keeping. In Arizona, certain financial reports are required to be completed on an annual basis, namely a Compilation, Review, or Audit. These reports are completed and signed off by a CPA (Certified Public Accountant)

Ensure Accuracy and Legal Compliance of HOA Financial Statements With Heywood Community Management

At Heywood Community Management, we understand the critical importance of accurate and compliant HOA financial statements. Our experienced professionals provide comprehensive HOA finance & accounting management services, including the preparation and review of all necessary financial statements. By partnering with Heywood, your HOA can benefit from:

• Expertise in HOA financial management and accounting best practices
• Timely and accurate preparation of financial statements
• Assistance with budget planning and reserve fund management
• Secure online access to financial information for board members and homeowners
• Peace of mind knowing your HOA’s finances are in capable hands

Conclusion

HOA financial statements are essential tools for maintaining the financial health and transparency of your community. By understanding the various types of statements, their purpose, and the responsible parties involved, you can help ensure your HOA is on solid financial footing. At Heywood Community Management, we are committed to providing the expertise and support needed to navigate the complexities of HOA financial management. Contact us today to learn how we can help your community thrive through accurate reporting, legal compliance, and financial transparency.

Heywood Community Management specializes in homeowners' association (HOA) management in Arizona and surrounding areas such as Gilbert, Chandler, Tempe, Mesa, Queen Creek, Scottsdale, Phoenix, and more. Heywood HOA Management has actively been a part of Arizona's Real Estate market since 1933. With a single focus on community association management, Heywood Community Management is dedicating its resources to raising the community management standard of quality.